Illinois is typically one of the most active U.S. states for bank M&A, and it currently leads the way in 2022.

As of June 14, 10 deals have been announced this year with an Illinois-based bank or thrift target. Wisconsin has been the second-most targeted state with six deal announcements, followed by Texas, Florida and Missouri with five deals each, according to S&P Global Market Intelligence data.

This article is part of S&P Global Market Intelligence's series of state profiles, which take an in-depth look at M&A and key banking metrics for banks and thrifts with less than $10 billion in assets.

Deal pace set to surpass 2021 levels

As things stand, 2022 has already bested 2020's eight deal announcements and may top last year's 16 announcements, excluding terminations.

This year's 10 targets involved an aggregate of $1.75 billion in assets in the quarter prior to deal announcement, down significantly from 2021's $28.15 billion. Even after excluding Chicago-based First Midwest Bancorp Inc.'s $21.21 billion in assets prior to its merger of equals announcement with Evansville, Ind.-based Old National Bancorp, last year's remaining 15 targets reported a combined $6.94 billion in assets.

Recent deal announcements

Most recently, on June 9, Waterloo, Ill.-based First Waterloo Bancshares Inc. announced that it would acquire St. Libory, Ill.-based Village Bancshares Inc in a transaction that will send the combined company above $900 million in assets.

* Download an Excel template containing first-quarter 2022 financial information for Illinois community banks. * Download a state banking profile Excel template.

The previous three acquisitions in the state, announced between April 27 and June 3, all involved credit unions buying an Illinois community bank. Rantoul, Ill.-based Credit Union 1's acquisition of Gurnee, Ill.-based Northside Community Bank is also the year's largest announced acquisition by target assets in the state.

Since the beginning of 2021, Illinois banks have been targeted six times by credit unions, more than any other state.

Illinois community banks performing below regional, national levels

Illinois' community banks and thrifts under $10 billion in assets underperformed in all six of the major banking metrics examined in the first quarter, posting a lower median ROAE, net interest margin, loan growth and deposit growth than the regional and national medians. In addition, the state's median efficiency ratio and nonperforming assets ratio was also higher than the regional and national mark.

Top 25 Illinois community banks

However, Effingham-based Midland States Bank and Chicago-based Byline Bank, Illinois' two largest community banks under $10 billion in assets, posted a majority of first-quarter results better than their peers.

Both Midland States and Byline Bank bested the state, regional and national medians in most of the six metrics examined, only coming up short in credit quality. Midland States' 0.86% nonperforming assets ratio was 50 basis points higher than the Illinois median, while Byline's NPA ratio was 1 basis point below the Illinois median, but was still above both the regional and national medians of 0.27% and 0.28%, respectively.

Branch networks shrinking

Illinois, like the rest of the U.S., is seeing more branch closures than openings as banks look to cut costs and customers migrate to digital channels. Over the last 12 months to March 31, 157 bank or thrift branches were closed in the state and only 33 were opened.

According to a recent S&P Global Market Intelligence analysis, both Byline Bancorp Inc. and Aurora, Ill.-based Old Second Bancorp Inc. were among the most active in branch closures in the country since the beginning of 2020 as a percentage of their total branch network.

Since the beginning of 2020, Byline has closed 23 branches – more than one-third of its network – and opened none, as it looks to cut costs.

Meanwhile, 14 of the 19 branches that Old Second has shuttered since December 2021 previously belonged to Lombard, Ill.-based West Suburban Bancorp Inc., which Old Second acquired Dec. 1, 2021.